Washington Report 360 | July 20, 2018

Key highlights

• In a challenge similar to those against the CFPB, the Court of Appeals for the Fifth Circuit ruled that the single-director structure of the FHFA is unconstitutional because the "for cause" limitation on removal violates the separation-of-powers.
• Regulators and lawmakers showed heightened attention to cryptocurrencies with release of an investor advisory, Congressional hearings, and new monitoring framework.
• The Senate confirmed Randal Quarles to a full 14-year term as a Fed governor, ensuring that he can fulfill his four-year term as Vice Chair for Supervision; he is an advocate of a multi-dimensional approach to risk-based supervision and regulation across all banking entities.
• The SEC adopted amendments to Regulation ATS that will require certain alternative trading systems (ATSs) to file detailed public disclosures.

Financial services legislative and regulatory news

The Court of Appeals for the Fifth Circuit ruled that the single-director structure of the FHFA is unconstitutional because the "for cause" limitation on removal violates the separation-of-powers.

The House of Representatives passed the bipartisan JOBS and Investor Confidence Act of 2018, which includes 32 pieces of legislation that address capital markets regulations for small businesses, resolution plans for BHCs, and investor protections, among others. The bill now goes to the Senate for consideration.

The SEC adopted amendments to Regulation ATS that will require certain alternative trading systems (ATSs), including so-called "dark pools," to file detailed public disclosures.

The SEC adopted final rules to amend Securities Act Rule 701 to raise the threshold from $5 million to $10 million for exemption from registration for securities issued by non-reporting companies pursuant to compensatory arrangements.

The CFPB announced a Director for its new Office of Innovation, a financial technology “regulatory sandbox” designed to encourage innovation in areas such as cryptocurrencies and microlending.

Financial services policy news

The Senate confirmed Randal Quarles to a full 14-year term as a Fed governor; he was previously confirmed in October 2017 to fill an unexpired term that ended in January 2018 as well as to serve a four-year term as Vice Chair for Supervision.

Randal Quarles discussed the factors the Fed is considering to further tailor supervision and regulation of large banking entities; he stated the framework should have greater differentiation across firms based on multiple factors and a clear differentiation between G-SIBs and other entities.

Fed Chair Jerome H. Powell testified before the House and the Senate on the Fed’s Semiannual Monetary Policy Report to the Congress, which also included discussions of stress testing, the SIFI threshold, and regulatory tailoring.

Andrew Bailey, Chief Executive of the Financial Conduct Authority, CFTC Chairman J. Christopher Giancarlo, and Fed Vice Chairman Randal Quarles each discussed the transition away from LIBOR.

Heightened attention to cryptocurrencies continues:

• FSB published a report on the metrics it will use to monitor crypto-asset markets as part of its ongoing assessment of financial system stability.
• CFTC issued its fourth advisory on virtual currencies.
• Congressional committees conducted hearings on federal oversight of cryptocurrencies and potential domestic and foreign uses for cryptocurrencies, including by central banks.